Treasury Inspector General for Tax Administration

Press Release

The Internal Revenue Service Did Not Ensure That Citibank Travel Card Rebates Were Properly Allocated

WASHINGTON – The Internal Revenue Service (IRS) has significantly increased the dollar amount of rebates it receives through its new Citibank travel card contract, but it has failed to ensure that these rebates were properly allocated, according to a report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).

The IRS provides individual Citibank credit cards to employees to use while traveling on official Government business. Since the cards are intended solely for use while traveling, they are known as travel cards. IRS travel expenditures have steadily increased between Fiscal Years 2007 and 2009.

Citibank gives travel card rebates to the IRS based on the total dollar volume of the IRS’s travel expenditures and the timeliness of the traveler’s payments. Funds appropriated by Congress may only be used for the programs and purposes for which the appropriation was made; therefore, rebates are required to be returned to the IRS appropriation account(s) from which travel expenditures were originally charged. TIGTA reviewed IRS controls to ensure that the amount of travel card rebates were accurate and properly allocated. In November 2008, the Department of the Treasury negotiated a new SmartPay2 contract with Citibank that contained higher basis points and an additional type of rebate for individual travel account cards. This, along with the IRS’s use of the split-disbursement option in its new automated travel system, GovTrip, collectively resulted in a significant increase in the rebate amounts the IRS received, TIGTA found.

However, TIGTA found that the IRS’s Agency-Wide Shared Services function retained the majority of the approximately $3.2 million in rebates received from October 1, 2004 through December 31, 2009, instead of properly allocating the funds back to all five IRS appropriation accounts. TIGTA found that this resulted in a misappropriation of funds, but did not identify any instances in which the funds were used for personal use or any evidence of criminal wrongdoing.

In addition, there is no assurance that the rebate amounts the IRS receives are accurate. Citibank does not provide any data that would allow the IRS to recalculate and verify the accuracy of the rebates.

“The IRS must ensure that these rebates are distributed back to the correct budget appropriation accounts,” said J. Russell George, the Treasury Inspector General for Tax Administration. “These funds could then be used for normal IRS operations and provide direct services to American taxpayers,” Mr. George added.

TIGTA made five recommendations to the IRS in its report, and the IRS agreed with all of those recommendations.